Correlation Between DWS Municipal and Western Asset
Can any of the company-specific risk be diversified away by investing in both DWS Municipal and Western Asset at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining DWS Municipal and Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DWS Municipal Income and Western Asset High, you can compare the effects of market volatilities on DWS Municipal and Western Asset and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in DWS Municipal with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of DWS Municipal and Western Asset.
Diversification Opportunities for DWS Municipal and Western Asset
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between DWS and Western is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding DWS Municipal Income and Western Asset High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset High and DWS Municipal is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on DWS Municipal Income are associated (or correlated) with Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset High has no effect on the direction of DWS Municipal i.e., DWS Municipal and Western Asset go up and down completely randomly.
Pair Corralation between DWS Municipal and Western Asset
Considering the 90-day investment horizon DWS Municipal Income is expected to under-perform the Western Asset. But the stock apears to be less risky and, when comparing its historical volatility, DWS Municipal Income is 1.21 times less risky than Western Asset. The stock trades about -0.26 of its potential returns per unit of risk. The Western Asset High is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest 393.00 in Western Asset High on September 20, 2024 and sell it today you would lose (4.00) from holding Western Asset High or give up 1.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
DWS Municipal Income vs. Western Asset High
Performance |
| Timeline |
| DWS Municipal Income |
| Western Asset High |
DWS Municipal and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DWS Municipal and Western Asset
The main advantage of trading using opposite DWS Municipal and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DWS Municipal position performs unexpectedly, Western Asset can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Western Asset will offset losses from the drop in Western Asset's long position.| DWS Municipal vs. DTF Tax Free | DWS Municipal vs. Blackrock Muniyield Quality | DWS Municipal vs. Blackrock Muni Intermediate | DWS Municipal vs. Blackrock Muniholdings Quality |
| Western Asset vs. Western Asset Global | Western Asset vs. Western Asset Global | Western Asset vs. European Equity Closed | Western Asset vs. Western Asset High |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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